Lyondell may sell city plant

Chemical company is pondering deal as part of restructuring

January 26, 2007|By Allison Connolly | Allison Connolly,Sun reporter

Lyondell Chemical Co. might sell its Hawkins Point plant, which makes white pigment for everything from printer paper to the writing on M&Ms, as part of a restructuring of its inorganic chemicals business.

A decision is to be made "in the coming weeks," Chief Financial Officer T. Kevin DeNicola said during a conference call with analysts yesterday to discuss fourth-quarter and year-end financial results. "We continue to consider all our options to be open," he said, and those might include a sale, a joint venture or continued ownership.

He declined to say which plants would be sold or how many, but he said the company has narrowed the group of bidders down to between five and 10.

Houston-based Lyondell, the world's fourth-largest chemicals maker, acquired the Hawkins Point plant in South Baltimore as well as three other Maryland facilities in 2004 with the $2.7 billion purchase of competitor Millennium Chemicals Inc., which retained its name and is a subsidiary.

Lyondell employs 10,000 people worldwide and nearly 450 in the state, including 170 employees and contractors at Hawkins Point.

The company is the world's second-largest producer of inorganics - chemicals without carbon - behind DuPont.

At Hawkins Point, workers manufacture titanium dioxide, a white powder-based pigment, from raw titanium ore. It is sold by the bag to companies that make paints, coatings, plastics and paper. Lyondell conducts research on titanium dioxide and other performance chemicals at its Baltimore Research Center in Glen Burnie. It also has a silica gel plant, the St. Helena facility on Broening Highway, and Millennium's headquarters in Hunt Valley.

Yesterday, Lyondell reported disappointing fourth-quarter sales, including a loss of $35 million in its inorganic chemicals business, which DeNicola blamed on the slowdown in the housing market and operating problems at two plants outside Maryland.

The loss was partly offset by price increases in Europe and Asia.

For 2006, the inorganics business had sales of $1.35 billion, out of a total of $22.2 billion. It is the smallest of Lyondell's four operating segments, but one with potential, said President and Chief Executive Officer Dan F. Smith.

"It's a good business," Smith told analysts during yesterday's call. "We just need to make some changes to unlock that value."

Over the past year, workers in Baltimore have speculated about a possible sale, said Jim Strong, sub-district director for United Steelworkers District 8. Late last year, when the employment contract was about to expire with Local 14019, which represents about 100 production and maintenance workers at Hawkins Point, and Local 12200, which represents about 25 workers at St. Helena, the company did not want to negotiate another three-year contract, Strong said. Rather, the company and the union agreed to a one-year extension of the existing pact, adjusted for wages.

"We read between the lines," Strong said.

Hawkins Point was built in 1954 by the Glidden Co., according to Lyondell. The work force, once as large as 500, has dwindled over the years under a number of different owners, Strong said.

Workers, he said, are anxious to know whether they will get a third owner in less than three years.

"There's always the unknown factor with a new owner," he said. "Our goal is to have a good working relationship with them. But I can't say anything until we know who the owner is."

Lyondell stock closed up 8 percent yesterday to a new 52-week high of $29.31 a share.